The Impact of Water Clarity on Home Prices in Vilas and Oneida Counties, Wisconsin : A Hedonic Study

Abstract

This study estimates the residential property value gains associated with improvements in water clarity on 60 Northern Wisconsin lakes. Using a two-stage hedonic model applied to Wisconsin DNR water clarity data and data associated with 271 residential home sales obtained from Zillow.com and County property records. We conclude that a one (1) meter improvement in water clarity would produce a $8,090.87 – $32,171.12 improvement in the market price of an average residential property on a lake within the study area. We also conclude that in addition to water clarity the main non-housing attributes that drive property value in the region are the local tax rate and the distance to a public airport. There exist a significant number of lakes in Northern Wisconsin that exhibit low levels of water clarity. It is also a well-established fact that perceptions of water quality and water clarity have a significant bearing upon residential property values. It is the case that an improvement in water clarity on those lakes that currently exhibit low clarity would result in a significant improvement in property values. (Not to mention a number of other economic benefits – such as increased tourism.) Rising property values also means increased property valuations and – potentially – State and local tax revenue. On the other hand, improving water clarity is not without costs. The matter is therefore a balancing act: In cases where the economic benefits exceed the costs associated with water clarity improvement there is a clear case to be made for said improvements.